ESG investing promises to align your portfolio with your values. But an important question remains: Whose values are shaping the standards?
Environmental, social, and governance ratings are often presented as measures of corporate responsibility. Yet the assumptions behind those ratings may not always align with biblical convictions.
Nick Schmitz, Professor of Finance at The Catholic University of America and a Board Member of the Christian Investing Council (CIC), joined the show today to explain the differences between ESG and faith-based investing—and why Christians should pay attention not only to what they own, but also to how their shares are voted.
ESG and Faith-Based Investing Start in Different Places
ESG stands for environmental, social, and governance. ESG ratings attempt to evaluate companies based on their performance in each of those areas.
But Schmitz points out that ESG standards are developed by secular ratings agencies and can shift with cultural and political trends. Faith-based investing starts somewhere different: with convictions rooted in biblical truth.
That distinction matters because a company may receive strong ESG ratings while supporting practices that conflict with a Christian investor’s beliefs about issues such as the sanctity of human life, religious liberty, family, or human dignity.
There may certainly be areas of overlap. Christians care about justice, responsible stewardship, fair treatment of employees, and care for creation. But agreement on certain issues does not mean the underlying moral frameworks are the same.
Faith-based investing asks a deeper question: Does the way this company operates—and the way my ownership stake is used—reflect the convictions I am seeking to live by?
Your Shares Come With a Voice
One area investors may overlook is proxy voting.
Owning shares in a publicly traded company generally gives investors the opportunity to vote on certain corporate matters. But individual investors rarely cast those votes themselves. Instead, asset managers often rely on large proxy advisory firms to provide recommendations or process votes on their behalf.
That means Christians may unknowingly own investments whose shares are being voted in ways that conflict with their beliefs.
Schmitz offered an example involving shareholder proposals related to Google and crisis pregnancy centers. Some proposals sought changes in how those organizations appeared in search results and were characterized positively within ESG-oriented frameworks. Faith-based investors, however, could reach a very different conclusion because of their convictions regarding the unborn and the work of pro-life ministries.
For Christian investors, then, screening a portfolio may be only part of the stewardship equation. How shares are voted can matter too.
Moving Beyond Passive Ownership
Schmitz has been involved in developing proxy-voting policies designed to better reflect Catholic investment principles. The effort grew from concern that existing guidelines did not always reflect the convictions they claimed to represent.
The broader lesson applies to Christian investors of many traditions: we do not necessarily have to outsource our influence without asking questions.
Faith-based investing can involve both screening and engagement.
Screening considers whether a company’s products, services, or practices conflict with an investor’s convictions. Engagement asks whether shareholders can encourage companies toward practices that better promote human flourishing.
That makes faith-based investing more than a list of companies or industries to avoid. Shareholders can also use their ownership to advocate for positive c
